While all guests are valuable to the hotel industry, the positive economics of repeat customers can't be ignored. Building customer loyalty is one of the most important steps for a hotel's success.
Obviously, acquisition is important for generating repeat customers, but the real profit comes from keeping them. And it's not just the hotel industry that realises customer retention is where the profit is at.
Here are some of the reasons why repeat customers are better for the bottom line than new ones:
Repeat customers spend more
Repeat customers are more likely to upgrade and purchase your most expensive products or services. It all comes down to the development of trust. Eating at the hotel restaurant, feeling confident with the standard of food offered via room service and using any other facilities that involve a cost are more likely to be taken up by repeat guests.
Rewards program software provider, smile.io reiterate that repeat customers are the most profitable. According to smile.io, 40 per cent of a store's revenue is generated by repeat customers who represent just 8 per cent of the total customer base.
Various studies show that repeat customers spend more money and more often. One survey found that a company's top 10 per cent of customers (who are repeat customers) spend three times more per transaction than the other 90 per cent of customers.
In the hotel industry impeccable customer engagement has a crucial impact on success and repeat business. Happy guests are more likely to convert into brand ambassadors who are less price-sensitive.
New customers cost more
Attracting new customers costs five times more than keeping an existing customer. According to a recent report by Hotel Online, the costs of customer acquisition in the hotel industry are increasing. This is largely due to advances in technology and the associated costs and the increasing cost of marketing, including cuts given to online booking sites.
New hotel guests also cost more in terms of the initial sales process and in communication. New guests usually have more questions to ask prior to their stay and more time is generally spent with new guests to settle them in.
Repeat customers spread the word
There's nothing better than loyal customers when it comes to promoting your business. According to consumer insight company, Nielson, 92 per cent of consumers say they trust word-of-mouth or recommendations from friends and family above all advertising.
In our digital world, loyal guests do a great job of advertising, posting on Facebook or sharing photos of their stay with you on Instagram. This fosters trust and attracts new customers. Loyal visitors also give better reviews online.
Upselling is easier with repeat customers
Loyal guests spend more money, usually because they are more familiar with what is on offer at a hotel they have visited before. In addition, loyal guests often stay longer. Even tips to hotel staff by repeat guests tend to increase.
Repeat customers already get the brand and are generally already on board with what is on offer. The trust repeat customers have in a particular hotel makes it easier to persuade them to buy into upsells than customers who are completely new.
Personalised upgrades and upsells can be offered to repeat guests based on the information you have collected from previous visits. Upselling can include room upgrades, food and beverage updates, special services, such as spas and restaurants. Once you know your guests' preferences you can upsell to cater for their needs.
See here for the hotelier's guide to successful upselling.
Customer retention is the key to business success
Brexit has meant that British holidaymakers are taking a more cautious approach to holidaying abroad. The effects of Brexit on the pound is also means more overseas tourists are coming to the UK. This is good news for hospitality in the UK.
Attracting repeat customers requires a strategy (read about 6 strategies for guest retention here). Simplifying operations with the right technology is also important for customer retention. According to Forbes, a 5 per cent increase in customer retention can increase a company's profitability by 25 to 95 per cent.
A loyalty scheme gives hotels the opportunity to develop a strong connection with guests. According to Hotel News Resource 61 per cent of travellers opt for loyalty programmes with a broad spectrum of loyalty rewards and 68 per cent of millennials display loyalty to a hotel brand that offers the most rewards.
See here for more tips on ways to build customer loyalty for hotel owners.